question
Which of the following is not a basic characteristic of monopolistic competition?
a. recognized mutual interdependence
b. product differentiation
c. a relatively large number of sellers
d. the use of trademarks and brand names
a. recognized mutual interdependence
b. product differentiation
c. a relatively large number of sellers
d. the use of trademarks and brand names
answer
recognized mutual interdependence
question
If you sum the squares of the market shares of each firm in an industry (as measured by percent of industry sales), you are calculating the
a. four-firm concentration ratio.
b. degree of collusion.
c. Lerner index.
d. Herfindahl index.
a. four-firm concentration ratio.
b. degree of collusion.
c. Lerner index.
d. Herfindahl index.
answer
Herfindahl index.
question
Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a monopolistic competitor?
a. Microsoft
b. Subway Sandwiches
c. Ford Motor Company
d. Pittsburgh Plate Glass
a. Microsoft
b. Subway Sandwiches
c. Ford Motor Company
d. Pittsburgh Plate Glass
answer
Subway Sandwiches
question
For which market model can we not assume a homogeneous product?
a. oligopoly
b. monopolistic competition
c. pure monopoly
d. pure competition
a. oligopoly
b. monopolistic competition
c. pure monopoly
d. pure competition
answer
monopolistic competition
question
A significant difference between a monopolistically competitive firm and a purely competitive firm is that the
a. former has fewer barriers to entry into the industry.
b. latter's demand curve is perfectly elastic.
c. latter differentiates its product.
d. latter recognizes that price must be reduced to sell more output.
a. former has fewer barriers to entry into the industry.
b. latter's demand curve is perfectly elastic.
c. latter differentiates its product.
d. latter recognizes that price must be reduced to sell more output.
answer
latter's demand curve is perfectly elastic.
question
If monopolistically competitive firms in an industry are making an economic profit, then new firms will enter the industry and the product demand facing existing firms will
a. not be affected.
b. increase.
c. decrease.
d. become less elastic.
a. not be affected.
b. increase.
c. decrease.
d. become less elastic.
answer
decrease.
question
The less elastic a monopolistic competitor's long-run demand curve, the
a. lower its average total cost at its equilibrium level of output.
b. lower its average total cost at its equilibrium level of output.
c. less its excess capacity.
d. higher its long-run profits.
a. lower its average total cost at its equilibrium level of output.
b. lower its average total cost at its equilibrium level of output.
c. less its excess capacity.
d. higher its long-run profits.
answer
lower its average total cost at its equilibrium level of output.
question
The downward-sloping demand curve of a monopolistic competitor
a. becomes eventually horizontal in the long run.
b. reflects some level of control over its own price.
c. ensures that the firm will produce at minimum average cost in the long run.
d. indicates collusion among the members of the product group.
a. becomes eventually horizontal in the long run.
b. reflects some level of control over its own price.
c. ensures that the firm will produce at minimum average cost in the long run.
d. indicates collusion among the members of the product group.
answer
reflects some level of control over its own price.
question
In monopolistic competition there is an underallocation of resources at the profit-maximizing level of output, which means that
a. ATC is not equal to MC.
b. price is greater than MR.
c. price is greater than minimum ATC.
d. price is greater than MC.
a. ATC is not equal to MC.
b. price is greater than MR.
c. price is greater than minimum ATC.
d. price is greater than MC.
answer
price is greater than MC.
question
Monopolistic competition is characterized by excess capacity because
a. firms charge a price that is greater than marginal cost.
b. firms produce at an output level less than the least-cost output.
c. firms are always profitable in the long run.
d. the demand for the product is perfectly elastic in this type of industry.
a. firms charge a price that is greater than marginal cost.
b. firms produce at an output level less than the least-cost output.
c. firms are always profitable in the long run.
d. the demand for the product is perfectly elastic in this type of industry.
answer
firms produce at an output level less than the least-cost output.
question
The more elastic a monopolistic competitor's long-run demand curve, the
a. greater its excess capacity.
b. lower its average total cost at its profit-maximizing level of output.
c. higher its price relative to that of a pure competitor having the same cost curves.
d. lower its long-run economic profit.
a. greater its excess capacity.
b. lower its average total cost at its profit-maximizing level of output.
c. higher its price relative to that of a pure competitor having the same cost curves.
d. lower its long-run economic profit.
answer
lower its average total cost at its profit-maximizing level of output.
question
At long-run equilibrium in monopolistic competition, there is
a. productive efficiency but not allocative efficiency.
b. neither allocative nor productive efficiency.
c. allocative efficiency but not productive efficiency.
d. both allocative and productive efficiency.
a. productive efficiency but not allocative efficiency.
b. neither allocative nor productive efficiency.
c. allocative efficiency but not productive efficiency.
d. both allocative and productive efficiency.
answer
neither allocative nor productive efficiency.
question
Which is true of pure competition but not of monopolistic competition?
a. Long-run equilibrium occurs at the minimum point on the ATC curve.
b. There are a large number of firms in the market.
c. There are no significant barriers to entry.
d. Long-run economic profits are zero.
a. Long-run equilibrium occurs at the minimum point on the ATC curve.
b. There are a large number of firms in the market.
c. There are no significant barriers to entry.
d. Long-run economic profits are zero.
answer
Long-run equilibrium occurs at the minimum point on the ATC curve.
question
(Consider This) In Wendy's 1987 commercial depicting a Soviet fashion show, one objective was to portray McDonald's and Burger King products as
a. only appealing to old women.
b. produced inefficiently.
c. unpredictable in terms of features and quality.
d. all the same and not very appealing.
a. only appealing to old women.
b. produced inefficiently.
c. unpredictable in terms of features and quality.
d. all the same and not very appealing.
answer
all the same and not very appealing.
question
In monopolistic competition, if a firm advertises and effectively raises consumer awareness of its product, it tends to
a. raise costs and increase demand for its product.
b. lower costs and increase demand for its product.
c. raise costs and decrease demand for its product.
d. lower costs and decrease demand for its product.
a. raise costs and increase demand for its product.
b. lower costs and increase demand for its product.
c. raise costs and decrease demand for its product.
d. lower costs and decrease demand for its product.
answer
raise costs and increase demand for its product.
question
Product differentiation in monopolistic competition involves a trade-off between
a. monopoly power and ease of entry.
b. productive efficiency and allocative efficiency.
c. short-run profits and long-run efficiency.
d. consumer choice and productive efficiency.
a. monopoly power and ease of entry.
b. productive efficiency and allocative efficiency.
c. short-run profits and long-run efficiency.
d. consumer choice and productive efficiency.
answer
consumer choice and productive efficiency.
question
Which is not a common form of nonprice competition in monopolistic competition?
a. annual design and model changes
b. cash rebates and discount coupons
c. customer services such as liberal guarantee and repair policies
d. advertisements featuring brand names
a. annual design and model changes
b. cash rebates and discount coupons
c. customer services such as liberal guarantee and repair policies
d. advertisements featuring brand names
answer
cash rebates and discount coupons
question
Dequam likes product variety, while Natasha is most concerned about paying the lowest price possible for a good. This suggests that
a. Dequam prefers purely competitive industries, while Natasha prefers monopolistically competitive industries.
b. Dequam cares more about productive efficiency, while Natasha cares more about allocative efficiency.
c. Dequam prefers monopolistically competitive industries, while Natasha prefers purely competitive industries.
d. Dequam cares more about allocative efficiency, while Natasha cares more about productive efficiency.
a. Dequam prefers purely competitive industries, while Natasha prefers monopolistically competitive industries.
b. Dequam cares more about productive efficiency, while Natasha cares more about allocative efficiency.
c. Dequam prefers monopolistically competitive industries, while Natasha prefers purely competitive industries.
d. Dequam cares more about allocative efficiency, while Natasha cares more about productive efficiency.
answer
Dequam prefers monopolistically competitive industries, while Natasha prefers purely competitive industries.
question
A significant benefit of monopolistic competition compared with pure competition is
a. stronger incentives to achieve economies of scale.
b. greater product variety.
c. improved resource allocation.
d. less likelihood of X-inefficiency.
a. stronger incentives to achieve economies of scale.
b. greater product variety.
c. improved resource allocation.
d. less likelihood of X-inefficiency.
answer
greater product variety.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
